A Savings Incentive Match Plan for Employees (SIMPLE) individual retirement account (IRA) helps small-business owners offer retirement benefits to themselves and their employees. As with other retirement plans, SIMPLE IRAs come with tax benefits, as well as contribution limits governing the amount of money you can add to the account each year.
SIMPLE IRA contribution limits for 2023
The SIMPLE IRA contribution limit for 2023 is $15,500. Those 50 or older can save an additional $3,500 as a "catch-up contribution."
If you also contribute to other employer-sponsored retirement plans, such as a 401(k) or 403(b), the total you can save as an employee across all of those plans is $22,500, or $30,000 if you're age 50 or over. (Sound familiar? This is equal to the maximum you can contribute to a 401(k).)
But that's only half of the SIMPLE IRA contribution limit equation. SIMPLE IRAs also have a separate contribution limit for employers. This is particularly important to keep in mind if you've opened a SIMPLE IRA as a self-employed person or as an owner-employee of a small business, as you can contribute up to the maximum for each type of contribution.
Note: Starting in 2024, a provision from SECURE 2.0 will go into effect that allows employees to contribute an additional 10% on top of the existing limits, so long as their employer has less than 25 employees or has 26 to 100 employees and agrees to a 4% employer match or 3% nonelective contribution.
SIMPLE IRA contribution limits for 2024
The SIMPLE IRA contribution limit for 2024 is $16,000. Those 50 or older can save an additional $3,500 as a "catch-up contribution."
If you also contribute to other employer-sponsored retirement plans, such as a 401(k) or 403(b), the total you can save as an employee across all of those plans in 2024 is $23,000, or $30,500 if you're age 50 or over.
SIMPLE IRA employer contribution limits for 2023
Employer contributions to SIMPLE IRAs generally follow one of 2 formulas. Employers can either:
- Contribute a dollar for each dollar you contribute, up to a max of 3% of your compensation. Typically, employers must perform this match for 3% of your compensation, provided you contribute at least this amount yourself. However, they can choose to reduce their match rate to less than 3% (provided it's at least 1%) for up to 2 out of every 5 years.
- Contribute 2% of your compensation (up to maximum salary of $330,000), no matter what you contribute. Employer contributions do not impact what you as an employee can defer from your pay as a SIMPLE IRA contribution. And it's important to note that whatever the employer does for one employee (including for themselves as the owner) they must do for all employees.
Note: Starting in 2024, a provision from SECURE 2.0 will go into effect that allows the employer to make an additional 10% nonelective contribution to each eligible employee in a uniform manner, to a max of $5,000.
Who's eligible to contribute to a SIMPLE IRA?
If your employer offers a SIMPLE IRA, you can generally contribute if you satisfy both of these requirements:
- You earned at least $5,000 either of the last 2 years from the employer sponsoring your SIMPLE IRA.
- You expect you will earn at least $5,000 from them this current year.
Your company may choose to adopt a plan with less restrictive income-eligibility requirements. You may meet the above criteria, but be ineligible to contribute if:
- You are covered by retirement benefits as part of a collective bargaining agreement.
- You are a not a US resident and received no US-sourced earned income.
SIMPLE IRA FAQs
What is the deadline for SIMPLE IRA contributions?
For employees, the SIMPLE IRA contributions should be made no later than 30 days after the end of the month in which they are deferred. So if you defer your April pay, the very latest to contribute those funds to your account is May 30.
What companies can offer SIMPLE IRAs?
For a company to offer a SIMPLE IRA, they must have under 100 employees and cannot have other employer-sponsored retirement savings plans. Those who are self-employed may also open SIMPLE IRAs on their own.
Are contributions to a SIMPLE IRA made pre-tax?
Employee contributions are pre-tax through payroll deductions. This means funds were withdrawn before income taxes had been applied. Contributions and earnings then grow tax-free as long as they remain in the account, and then withdrawals are taxed in retirement.